[CAnet - news] Economics of dumb pipes better than traditional cableTV business

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 [Bernstein Research recently published a report claiming that the economics
of providing dumb pipes to customers is better than traditional video
services offered by cable companies.  In their report they claim if cable
operators chose to be effectively relegated to "dumb pipe" status providing
raw connectivity without participation in intellectual property upside from
the delivery of video service that the financial metrics are actually better
than their current business today.  In this scenario revenues would decline
significantly, but operating expenses would fall more significantly. Capital
employed in the business would also fall sharply yielding much higher ROI
and ROE.

The report concludes that last mile access networks are getting more
constrained and therefore becoming more valuable with increasing network
scarcity.  This is despite the announced fiber roll outs by the telcos which
at best will only reach 40% of the homes in the US.  As well the telcos
integrated cost of providing broadband will be always higher than MSOs.

Video over the Internet is likely to be the next big thing as content
providers attempt to bypass the MSOs in reaching the end customers. In
addition new markets of video delivery such as user generated video like
YouTube will be a burgeoning market. Low cost connectivity as opposed to
content will likely be the big economic driver.

This of course has been long argued by Andrew Odlyzko that "Content is not
King" www.dtc.umn.edu/~odlyzko/doc/history.communications2.pdf

The Bernstein Report also argues that a "third network" delivery mechanism
(WiFi, 3G, BPL, etc) is very unlikely if video file distribution becomes one
of the major applications on the Internet.  

The Bernstein research brand is defined by their renowned "blackbook"
reports. These are known for their unbiased in-depth company and industry
forecasts. Unfortunately I do not know if this report is publicly available.
Thanks to David Meyer for this pointer.-- BSA]

http://www.bernsteinresearch.com/


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those  of the CANARIE board or management.


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